Citizens Bank is piloting a new corporate investment program that allows clients to invest in environmentally responsible companies, relying in part on back-end automations and algorithms to help review and monitor their portfolio.

The Green Deposits program allows corporate clients to invest in sectors such as energy efficiency, renewable energy, sustainable food, agriculture, waste management and greenhouse gas reduction. It’s currently being tested with a few clients are helping to refine the product and train the algorithms behind it, said Pat Nuzzo, head of commercial liquidity management for the Providence, Rhode Island-based Citizens Bank.

Early clients include telecommunications company Lumen and Forrester Research. Both declined to be interviewed because they only recently joined the pilot.

“We were able to capitalize on some existing infrastructure to bring it to market,” Nuzzo said of the Green Deposits product. “But on the back end, we did stand up a secure, scalable platform on a virtual server to automate the things like the daily review of reporting and establish some business rules and algorithms to monitor the portfolio that are not on the front end,” he told Bank Automation News. “As the product evolves, and as we learn from customers and improve the product, we will continue to build on it and employ both AI and automation.”

The automation involves algorithms on the back end that help manage the portfolios, one of which sits on a deposit platform and the other on a lending platform, Nuzzo said. Since the two platforms don’t “speak” to each another, Citizens built a scalable platform on a virtual server that automates the daily reviews and monitors the portfolio.

“There’s moves in the portfolio that we want to be sure that are top of mind, or we have transparency for, and we put the algorithms into the portfolio so that at the front end, it makes it easy to track and manage the portfolio from a program perspective,” Nuzzo said.

While large corporations can afford to hire experts in environmental, social and corporate governance (ESG) programs, that’s not necessarily the case for down-market companies that may not have the treasury or finance staff to put together the instruments and manage them appropriately, Nuzzo added. With Green Deposits, the $184.5 billion Citizens hopes to bridge that gap.

“Even some of the investments that are out there, like green or sustainable bonds, are more suited for large corporates, with more sophisticated treasury or financings in those for those investments,” Nuzzo said. “You really need to manage the market and critical risk associated with those instruments.”

One critique commonly leveled at ESG programs is that they can be a “black box” for investors, who don’t always know the rationale behind labeling a company “green” or “socially responsible.” ESG is largely an opt-in practice without regulatory requirements, although that will most likely change, Everest Group analyst Kriti Gupta told BAN.

“There is this big question from banking enterprises: How are these frameworks structured, what goes into the modeling aspect of it? … [Banking, financial services and insurance] firms are realizing that this cannot be a black box to them,” she said. “They need that transparency.”

To avoid that issue, Citizens has engaged Sustainalytics, a Morningstar company that rates the sustainability of companies based on their environmental, social and corporate governance performance. Sustainalytics developed eligibility criteria for what qualifies as ESG along 10 “green” themes and 18 subthemes.

“We detail what we consider green investments and what we do not consider green investments as part of that eligible criteria,” Nuzzo said. “We have Sustainalytics vet our portfolio to ensure that our assets, as we go to market with a portfolio, were properly aligned with the eligibility criteria. And it also will provide an annual review going forward to certify the program.”

The Bank Automation News webinar on automation technology for exceptional bank cybersecurity and ID verification takes place on Thursday, Sept. 9, at 11:30 a.m. ET. Register here. Attendees will be able to ask questions via chat.